FET consultation: how much is a Bitcoin worth, and why?

Blockchain technologies have a strong transformational potential. Bitcoin and other cryptocurrencies, currently the most well-known blockchain based applications, enable the possibility of a distributed management of secure transactions amongst “anonymous” parties, i.e. payments in this case, without the need of a centralised validation authority.

However, a much wider range of possible applications are emerging for blockchains. Examples include smart contracts, i.e. enforceable, fully-decentralised agreements between independent peers; the possibility of enforcing fairness in distributed protocols, so-far unachieved; and the availability of a public Big Data set of transactions to be explored by Data Scientists to unveil useful knowledge.

Although highly volatile, Bitcoin has a capitalisation of 7 billion USD (doubled over the last year) and is receiving a lot of interest from private companies and institutional partners, noticeably the EU parliament (April 2016). The success of Bitcoin has fostered the development of alternative cryptocurrencies and frameworks for smart contracts, notably Ethereum with a market capitalization of 700 million USD.

Despite their diffusion and resilience in practice (the only successful attacks to Bitcoin have been, so far, standard frauds), foundations of blockchain technologies have still to be fully understood, and no fully satisfactory scientific validation of their correctness and security exist yet. Difficulties arise from many sources at different levels: the complexity of the decentralised, probabilistic and multi-layer structure of a blockchain, the scattered documentation, the relevance of human and economical aspects on the management and stability of the system, and the globalised dimension of the applications, which also brings into play political aspects, to cite but a few.

Even considering all the issues, challenges and currently open problems, blockchain technologies are clearly deemed to have a strong impact on society, empowering people, companies and institutions to directly manage some of their interactions, akin to the empowering made by Internet in terms of direct access to knowledge and communication. Analogously to what happened with Internet, which for instance is nowadays accepted as a trusted commerce medium, blockchain technologies need to be deeply understood and validated before the breakthrough changes that they will enable can become a trusted component of our society.